GLOBAL WEEKLY KICKSTART

Global equities fell 1.6% last week as risk appetite deteriorated and Momentum reversed (Exhibit 11 & Exhibit 31). Technology led the correction, falling 7% (Exhibit 3), while EM and Asia declined by around 5% (Exhibit 1). Europe outperformed, supported by its lower exposure to AI and its Value characteristics (Exhibit 28). Across assets, US 10y yields fell by 17bp.

Global equities face a higher cost of capital. Credit and sovereign spreads are widening, cyclical exposure is being cut, and weaker balance sheets are under pressure. The Quality long-short pair has risen 12% in the US and 5% in Europe since its September low. This rotation could continue as earnings growth slows from 30% in 2026 to c.15% in 2027 in the US, and from 20% to below 10% in Europe, while higher energy costs pressure margins.

Macro data this week US: S&P PMI. Fed officials are not expected to speak this week, reflecting the blackout period ahead of the FOMC.

Narrow market breadth adds risk. The gap between headline indices and the median stock can close through a catch-up by laggards or a catch-down by recent winners, but both imply a Momentum reversal. Quality looks attractive in a catch-down, as positioning remains light and valuations are less demanding. However, with lower inflation, energy prices and interest rates still our economists’ base case, we favour selective Quality exposure rather than a broad defensive shift.

Europe: UK August unemployment and earnings growth, September payrolls and inflation; Euro Area October consumer confidence; and preliminary October PMIs in France, Germany, the Euro Area and UK.

Japan: September national new core CPI and export value.

AEJ: Q3 GDP and September activity data in Mainland China, industrial production in Taiwan, CPI in Malaysia and Singapore, and Korea 20-day exports. Central bank meetings in Korea, Indonesia and Philippines.

See more: Europe Weekly Kickstart: Quality Control and US Weekly Kickstart: What to own when slowing growth meets narrow breadth.

Pricing is as of the close of Friday, October 16.